Americans' Savings Down, Spending Up

They said you'd changed, embraced a "New Frugality." But it turns out you're back at the mall.

Once again, Americans are saving less and spending more. It seems that last year’s increase in saving was more a brief flirtation with thrift and self-denial prompted by momentary circumstances than a fundamental shift in consumer behavior. While Americans aren’t returning to the go-go times that preceded the Great Recession, the savings rate is slipping again and consumers are ready to fuel the economic recovery with the contents of their wallets. I expect the saving rate to remain around 3% for the next year or so.

On Oct. 9, 2008, arguably the pinnacle of the financial crisis that sent our economy into the abyss, BusinessWeek magazine featured a cover story titled “The New Frugality.” Calling it the “dawning Age of Frugality,” the article quoted a University of Wisconsin economist who asserted that “consumers won't be in a position to spend freely for five years.” BusinessWeek wasn’t alone in that view. Barbara Dafoe Whitehead of the Institute for American Values opined “a turn to savings and wiser spending may persist for a long time,” citing, among other factors, “generational imprinting.”

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Richard DeKaser
Contributing Economist, The Kiplinger Letter